July 8th, 2011

In a July 7 letter to IRS Commissioner Doug Shulman, the AICPA offered its perspective on the agency’s development of the registered tax return preparer examination. The IRS anticipates that it will begin offering the exam this fall to prospective candidates.

In general, CPAs and employees under their supervision will be exempt from taking the exam. While the exam does not significantly affect AICPA members, Patricia Thompson, chair of the AICPA’s Tax Executive Committee, pointed out the AICPA’s experience with the development and administration of the Uniform CPA exam and its desire to help “craft an examination that measures the requisite level of knowledge and skills required of an entry level tax return preparer.”

Under the parameters suggested by the AICPA, the exam would be four or more hours long and divided into two parts—an objective, multiple-choice and/or short-answer portion that covers knowledge of basic tax and Circular 230 topics, and a second section in which the candidate is presented a fact pattern requiring the preparation of a simple tax return. The AICPA further recommended that candidates be permitted to retake the exam 30 days after being notified of the results of a previous test.

The AICPA also recommended that the exam cover:

• Basic compliance issues, as well as addressing fraud, negligence, and the high error rates associated with the earned income tax credit;
• Preparer and taxpayer penalties; and
• Problems related to making unethical advertising claims.

Overall, Thompson said the exam should “be based on an analysis of the most frequently performed activities and the most common errors by preparers.” She also noted the AICPA’s support for offering the exam in as many languages as the Form 1040 is available but cautioned about unintended changes to the meaning of a question that could result from translations.